Angola Monetary Policy July 2022

Angola: Central Bank stands pat in July

The National Bank of Angola’s Monetary Policy Committee stood pat at its 29 July meeting, leaving the basic interest rate at 20.00%. It also left the standing liquidity absorption facility rate at 15.00%. However, the Bank lowered the standing liquidity lending facility rate from 25.00% to 23.00%, and the mandatory reserve rate in national currency from 19.00% to 17.00%.

In deliberating its decision, the Bank noted that inflation continued to trend downwards in June on the back of previous monetary policy action and the appreciation of the kwanza. Moreover, the Bank stated that it expects inflation to moderate to “slightly below 18% […], keeping the inflation target around single digits in the medium term”. As such, the Bank opted to leave the main monetary policy tool unchanged. However, it altered the other tools to alleviate “financial intermediation costs, without, however, altering the trajectory of reduction of inflation that has been observed since the beginning of the present year”.

The Bank did not provide explicit forward-looking guidance on the direction of the basic interest rate. However, it hinted at keeping the basic rate stable in the near term as greater global downside risks warrant “continued prudence in the conduct of monetary policy”. That said, some FocusEconomics panelists expect the Bank to lower the basic interest rate by year-end to continue stimulating economic activity, facilitated by moderating inflation.

Analysts at the EIU, however, expect the Bank to commence an easing cycle next year:

“We expect the BNA to keep the policy rate at 20% […] for the remainder of 2022 to contain inflation. In 2023-26 we expect full-blown monetary policy loosening, with a cumulative 650-basis-point cut in the main policy rate in 2023-24. This policy loosening will track the real interest rate, which is currently negative and is theoretically due for revision.”

The next monetary policy meeting is scheduled for 16 September.

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